Correlation Between Modernland Realty and Lippo Karawaci

Can any of the company-specific risk be diversified away by investing in both Modernland Realty and Lippo Karawaci at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Modernland Realty and Lippo Karawaci into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Modernland Realty Ltd and Lippo Karawaci Tbk, you can compare the effects of market volatilities on Modernland Realty and Lippo Karawaci and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Modernland Realty with a short position of Lippo Karawaci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modernland Realty and Lippo Karawaci.

Diversification Opportunities for Modernland Realty and Lippo Karawaci

0.23

Correlation Coefficient

Modernland Realty  Lippo Karawaci

Modest diversification

The 3 months correlation between Modernland and Lippo is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Modernland Realty Ltd and Lippo Karawaci Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lippo Karawaci Tbk and Modernland Realty is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Modernland Realty Ltd are associated (or correlated) with Lippo Karawaci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lippo Karawaci Tbk has no effect on the direction of Modernland Realty i.e., Modernland Realty and Lippo Karawaci go up and down completely randomly.

Pair Corralation between Modernland Realty and Lippo Karawaci

Assuming the 90 days trading horizon Modernland Realty Ltd is expected to generate 0.65 times more return on investment than Lippo Karawaci. However, Modernland Realty Ltd is 1.55 times less risky than Lippo Karawaci. It trades about -0.01 of its potential returns per unit of risk. Lippo Karawaci Tbk is currently generating about -0.03 per unit of risk. If you would invest  5,300  in Modernland Realty Ltd on September 19, 2024 and sell it today you would lose (200.00) from holding Modernland Realty Ltd or give up 3.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Modernland Realty Ltd  vs.  Lippo Karawaci Tbk

Modernland Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modernland Realty Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Modernland Realty is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Lippo Karawaci Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lippo Karawaci Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Modernland Realty and Lippo Karawaci

The main advantage of trading using opposite Modernland Realty and Lippo Karawaci positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modernland Realty position performs unexpectedly, Lippo Karawaci can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lippo Karawaci will offset losses from the drop in Lippo Karawaci's long position.

The idea behind Modernland Realty Ltd and Lippo Karawaci Tbk pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.